When you find a home you want to buy, it’s time to make an offer to the seller. Most offers include conditions, which are requirements or criteria that need to be met within a certain timeframe before the sale can be finalized. Standard conditions include approval of financing, a home inspection and, in the case of a condo purchase, status certificate review by a lawyer. The purpose of these conditions is to protect the buyer. If the conditions are not removed from the Agreement of Purchase and Sale by way of a Notice of Fulfillment or Waiver, the offer and the purchase becomes void.
Sometimes, buyers choose to make a firm offer without conditions. This often happens in a multiple offer scenario. There are pros and cons of taking this approach, which your Realtor should walk you through prior to making a decision.
The main benefit of a condition-free offer for a buyer is the ability to beat the competition. Typically, the offer includes a competitive price that’s over asking and a willingness to work with the seller’s preferred closing date. If the offer is accepted, the deal is firm.
On the downside, a condition-free offer comes with a great deal of risk.
While buyers may feel confident they will obtain a mortgage because they have a pre-approval letter and therefore don’t require a condition to financing, it is important to recognize pre-approval is not a guarantee of financing. The financing is subject to the lender approving the property and the sale – from the price and location to type of property or other variables the lender deems important. By submitting a condition-free offer without a financing guarantee, there is a risk the deal can fall through and you will lose your deposit.
If a buyer opts to skip the home inspection condition to have the offer accepted, then they assume huge risk as they do not know what they are getting. Generally, though, sellers that have a fixed offer date will have conducted a pre-listing home inspection so that buyers are comfortable not including this condition.
With a condition-free offer, there is also no opportunity for due diligence after the offer has been made. This requires the buyer to do all their research before their bid. If the seller is holding offers, you may have enough time to properly research the property and neighbourhood beforehand. This is often the case if you viewed the home shortly after it hit the market, as an offer date is typically set for 6 to 8 days from the listing date to allow enough people time to see it. However, if the seller is accepting offers anytime and there are multiple bids shortly after listing (and you viewed it), then submitting an offer without conditions is not due diligence and it is at the buyer’s behest.